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A Perfectly Competitive Firm Has a Random Demand with a 20

question 151

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A perfectly competitive firm has a random demand with a 20 percent chance of being $18 and an 80 percent chance of being $26. What is the firm's expected marginal revenue?


Definitions:

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance.

Variable Costs

Expenses that change in proportion to the activity of a business, such as materials and labor.

Marginal Cost

The incremental cost involved in creating an extra unit of a product or service.

Diseconomies of Scale

Occur when a firm's costs per unit increase as its output increases, opposite to economies of scale.

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